Consider This from NPR - The Global Supply Chain Is Still A Mess. When Will It Get Better?

Episode Date: September 28, 2021

Retail experts are already warning of delays, shortages, and price hikes this holiday shopping season as the pandemic continues to disrupt global supply chains. NPR's Scott Horsley reports on the interconnected nature of those chains — and what happens when a single part delays manufacturing by months at a time. University of Michigan economist Betsey Stevenson explains why labor-related delays and shortages are not going away any time soon. In participating regions, you'll also hear a local news segment that will help you make sense of what's going on in your community.Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

In Pennsylvania, they are rationing booze. If you go to a state store, you may only be allowed to buy two bottles of your favorite alcohol. The state liquor board says with supplies running so short, they had to create purchase limits for individuals and businesses on certain brands. Forty-three products are on the list. It includes bourbons, champagne, Hennessy, and Patron. Purchase limits are also newly in place at Costco. No more stocking up on toilet paper, cleaning supplies, and other items at Costco. And unlike the start of the pandemic, it's not because people are panic buying. It's because of supply chain issues overseas.

Many more companies are dealing with the same thing. Supply chain delays. And product shortages. For all types of goods. Nike is warning of delays through next year. Home Depot and Ikea are literally chartering their own shipping vessels to move product faster. And even though it's still September... Tis the season for holiday panic.

Global supply chain delays are threatening to disrupt shipments. Retail experts on network TV are already saying stuff like this about the holiday shopping season. There isn't a lot of inventory. So if you the longer you wait, the more of a premium you're going to pay on not just shipping, but also the price of those items. Wait, what? Consider this. The global supply chain has been a mess for nearly a year and a half. And things are not getting better anytime soon. From NPR, I'm Elsa Chang.

It's Tuesday, September 28th. This message comes from WISE, the app for doing things in other currencies. Send, spend, or receive money internationally, and always get the real-time mid-market exchange rate with no hidden fees. Download the WISE app today or visit wise.com. T's and C's apply. It's Consider This from NPR. Now, here's one big reason the global supply chain is still a mess. A lot of the stuff that we're buying these days is complicated to make. Cars, exercise bikes, laptops, power tools. I mean, this is the kind of stuff that contains a lot of different parts made in a lot of different places. And when manufacturers are missing just one of those parts, well, it's kind of like when you're

cooking dinner and you're almost done and then you realize, oh man, I'm missing one key ingredient. I mean, it's the worst, right? That is why unfinished products are piling up and taking a lot longer to get to the people buying them. Here's NPR's Scott Horsley. Nicole Walter runs a factory in Wakanda, Illinois that makes gears and pulleys used in a lot of industrial equipment. These days, she's got plenty of orders, but she's at the mercy of her suppliers, many of whom are short-staffed. I had an order for a plater that was sitting on their dock for six weeks. They hadn't touched it because they couldn't get the workforce, so that hurt. That kind of delay has ripple effects for Wolter's customers, other manufacturers that depend on her gears for their own machinery. I'm getting phone calls of,

hey, you're holding up a $5 million machine. What can you do? I need this next day air. How much overtime do you need? We'll pay for it. So I think there's just that air of desperation. A year and a half into the pandemic, factories are still scrambling to find the parts and workers they need to keep pace with booming demand. Tim Fiore, who runs a monthly survey of factory managers, says a single missing component can keep a whole product from moving out the door. You've got 99 of the 100 parts you need and you have work in process that's stuck. You've seen the pictures and stories about the trucks on the parking lots and every one of those vehicles sitting there waiting for a chip as part of the work and process inventory. Acres of unfinished cars parked and

waiting for semiconductors are just the most visible example of widespread shortages that are weighing on the economic recovery. Auto sales fell last month because dealers couldn't get enough cars to sell, but plastic products and even cardboard are also in short supply. For the Vermeer company in Pella, Iowa, it's wiring harnesses and hydraulic components that are hard to come by. CEO Jason Andringa says that's holding up production of things like tree stump cutters that are in high demand after Hurricanes Ida and Henri. We take pride in the fact that our equipment is used to help clean up after a natural disaster. And we try to maintain inventory during kind of the normal hurricane season, but we can't do that at

all right now. Andringa says the 73-year-old company, which his grandfather started, is enjoying record sales and on track to add about 300 workers this year. But he could have added twice that many if he had more parts to work with. My grandfather never dealt with supply chain challenges this troublesome. Finding parts is one challenge. Actually getting them to the factory is another. Record volumes of freight are overloading the transportation system, leaving key supplies stuck in traffic on trucks, trains, and cargo ships.

We hear this every day. Gene Sirocca runs the busy Port of Los Angeles, where some ships are now waiting more than a week to unload. When a container filled with critical parts is delayed, there's a multiplier effect, holding up deliveries of other products all down the line. We're working as if it's a triage situation. We're asking these companies to give us a list of their containers in priority fashion. We're working directly with the terminal operators and shipping lines

to rush that product through and get it out to those manufacturing facilities. There's little sign that supply shortages and delivery delays will ease anytime soon. So for now, factories are having to improvise. Nicole Wolter says she's tried to fashion alternatives for missing parts and asked her customers to okay substitutions. She and her crew are spending long days at the factory, and she's not getting a lot of sleep. I will say it's a circus, and I would like to get off this ride. Products Wolter used to deliver in five weeks now take nearly twice that long. But everyone else is just as slow, or even slower. And meanwhile, the orders keep coming in.

That was NPR's Scott Horsley. So yeah, shipping delays are one big part of the problem right now. Another is labor. Domestically, there have been shortages of truck drivers, warehouse workers, and dock workers. Internationally, COVID spikes have hobbled factories in places like Vietnam, Indonesia, and Malaysia. This global shortage of labor is also not going away anytime soon. I spoke to an economist at the University of Michigan, Betsy Stevenson. She's a former member of President Obama's White House Council of Economic Advisors, about why this labor shortage is going to continue for a while. All right, so Betsy Stevenson, before we even talk about how jobs and the supply chain are

connected, can I just ask you, have you even started your holiday shopping? Because I sure haven't. Oh, well, I actually been pushing my children to give me their lists for what they might want. And I have. I have actually already bought a few things for the holidays. That is very impressive. But I just want to ask you, because you are an economist, why are we even at this point? Like, you know, we all remember how hard it was to get Clorox wipes, masks, toilet paper at the beginning of the pandemic, but it's been more than 18 months. The supply chain is still out of whack. Why are we even talking about starting holiday shopping now? And what's September as soon as pumpkin spice hits the shelves? What is going on with the supply chain? Well, you know, I love that you

started with last year's problems because I think you want to think about there being three issues with the supply chain. One can be that we're changing what we consume. Last year, we all discovered a brand new love of hand sanitizer and Clorox wipes, and they just couldn't keep up with that newfound demand that quickly. But they've learned, and there's a lot of new companies making hand sanitizer. It's pretty easy to get. Same thing with masks. So that's one reason. If we change what we're trying to buy, well, then we've got to give the supply chain, meaning the people who make the stuff we want to buy, a time to respond.

The second reason why we can see what, you know, supply chain problems, it's what economists might call a bank run, right? You fear that everybody else is going to go ahead and take their money out of the bank. You fear, what we saw last year was a toilet paper run. And so we see stores now that are like, hey, we've been burdened by this before. And, you know, Costco's already got the one toilet paper per person, Please sign up. Now, the third thing is, I think, more of what's going on right now. A lot of companies just can't run things the way they were being run prior to COVID. And it's important for us to realize that COVID is affecting the entire world.

There are entire factories shut down because too many people in the factory have COVID for it to be able to operate. And I think we get so focused on what COVID means for us in the United States that we forget that there are people all over the globe who are sick and dying right now. And because they're sick and dying, they're not making computer chips or they're not making cars or they're not making clothes. All right. So yes, deaths from COVID are certainly a factor. But this global shortage of labor, there are other factors that have contributed to that, right?

Well, one thing to think about is there's been also a reduction in movement of people. So we don't have immigrants coming in doing some of the jobs that they used to do before in our country and other countries. But it's not obviously just immigration. We're also seeing that job, the characteristics of jobs have changed. And those characteristics have maybe made the job more dangerous, less pleasant. That means people might not want to do that job anymore, or they might be demanding higher pay in order to do that job. So we're seeing a lot of workers changing industries. We're seeing a lot of them changing occupations. They're looking for better opportunities and they're holding out for better wages.

And they can afford to hold out for better wages because there are so many opportunities out there. That's creating a slowdown of workers being allocated to new jobs. Right. People have choices now. So now there's some more churn in the labor market. I'm also kind of wondering, you know, because there was this notion that once the federal unemployment benefits ended, people would be venturing back into the workforce noticeably. But that isn't exactly what has happened. Can you explain why? I think a lot of people thought, oh, what people are doing is sitting at home and they're just saying, oh, the unemployment benefits are great, so I'm going to collect those while I can. And then, you know, when those run out, I'll go back to work. But I don't think

that's what was happening for most people. You know, people were stuck at home for a long time because of COVID, not just not out of work, but not able to do a lot of the things that they used to do. If we look at how people spent their time, time use looked different. People slept more, they spent more time with their family. And I think that that's led a lot of people to reevaluate what it, that they wanted out of their lives. And it's that re-evaluation that is, I think, slowing people down and getting them to think, gee, you know, what kind of job do I really want? Should I get some more training? Should I go back to school, study for some kind of certificate program? And I think people have had a lot of time to reevaluate what they want. And then on top of

that, the stimulus package, right? And then I was going to say, and on top of people being able to have time to think about making a change, we've had more money going into households. It's not, the mistake was thinking it was that unemployment insurance means I don't want to work today, but I'll work as soon as it ends. Instead, we should think about it as you could take a little bit more time to find a slightly better paying job without the threat of starving or being evicted. Right, because you have this cushion now. There is a cushion there, and I think that that cushion is part of the reason why workers have had a little bit more bargaining power. So let me ask you, people, you know, they're saving more because they have this cushion from the stimulus package.

There's a lot of churn in the job market, as we were talking about, as people are rethinking all of their options. Employers are dealing with instability because of COVID. What do you think? What is it going to take for people to get back to work? So let's assume that the path of COVID is that the Delta variant continues to die down, as it has over the last few weeks, that the vaccination rate continues to trickle up and might not disappear, but it may be less severe as an illness. We may not get more deadly variants and we may come to live with this. And I think if

that's the path we're on right now, then I think that things will settle down within the next year. But there is another path. That's a path where, because we don't make a lot more progress to the vaccination rate, a more deadly variant of COVID erupts. That causes us to have more slowdowns, if what we really care about is solving supply chain problems around the globe and the goods that are coming into the United States and our ability to sell abroad, then we have to be thinking not about just vaccinating Americans, but we have to think about vaccinating the world. Because we can't solve supply chain problems when there are people around the globe that are getting sick and dying. That was Betsy Stevenson, economist at the University of Michigan and former member of President Obama's

White House Council of Economic Advisors. It's Consider This from NPR. I'm Elsa Chang.